Diplomacy Brief: Tariffs and Trade Wars

The past two weeks have been muddled in updates, speculations, and fears surrounding President Trump’s trade policy. Issues surrounding trade first began in early March when the White House announced that it was planning on placing tariffs on foreign aluminum and steel in an effort to revitalize the United States’ domestic industries. On March 18, 2018, the White House officially instituted the tariff, requiring any domestic businesses, organizations, or individuals to submit exclusion requests if they wish to import these products without having to pay a tariff. The steel and aluminum tariff is expected to have a sharply negative impact on the United States’ trade relationship with Canada who is consistently one of America’s top trading partners and steel importers.

What has alarmed many economists is the broad approach the Trump administration is taking with the steel and aluminum tariff. According to the Council on Foreign Relations, the policy is unprecedented in nature since it does not account for included exemptions for the U.S.’s closest allies and trading partners. Past U.S. Presidents have utilized steep tariffs as part of their foreign policies, however, they were often directed towards specific countries or made special exceptions for allies. President Trump’s tariff covers all steel and aluminum imports regardless of where they come from. Additionally, the justification behind the tariff is atypical since it claims it is to protect national security. When the United States utilizes national security law to implement a policy goal it also typically places a time stamp on when the measure will conclude. The Trump administration’s aluminum and steel tariff do not include an end date or a process for economic review to indicate when it would be appropriate to end the tariff. This effectively makes the tariff entirely up to the discretion of the President.

In response to the steel and aluminum tariffs, the European Union has been outspoken in its willingness to retaliate. The EU has drafted a ten-page list of U.S. products which may be subject to tariffs which will have a sharp impact on the U.S. economy since its imports to the EU are valued at $3.45 billion. The European Commission has stated that the EU is able to take retaliatory action on legal grounds since the United States cannot justify the trade move as a national security measure. The list of proposed products to be tariffed cover a vast expanse of U.S. exports, including food, makeup, different types of vehicles, and kitchenware. The European Commission says that tariffs on these U.S. products can go into effect within a few short months. Canada also strongly opposed the decision but has not yet indicated if it will take retaliatory measures as the European Union has.

In addition to the steel and aluminum tariffs, the Trump administration is seriously analyzing the possibility of applying steep tariffs on a variety of Chinese industries ranging from technology to apparel. According to Reuters, in addition to a tariff on these industries, Trump also hopes to place a fine on China for “stolen” American intellectual property. These plans fall in line with his campaign claim to impose tariffs on all Chinese goods being imported into the United States. The latest reports have indicated that the Trump administration is seeking to apply up to $60 billion in tariffs on China by Friday.

As one of the United States’ top trading partners, China has also indicated its strong distaste for the economic measures the Trump administration has begun to take on foreign imports. Following the announcement that the U.S. would be implementing up to $60 billion in tariffs and fines against Chinese products, China also stated it would create retaliatory economic policies. Although both Presidents Trump and Xi indicated they did not desire a trade war between the two countries, these actions appear to indicate that a trade war may ensue.

The response to the United States’ unprecedented trade move has been alarming for U.S. businesses and consumers alike. Forty-five trade associations have strongly urged President Trump to reconsider its tariffs, especially those implemented against China. The trade associations highlighted their concerns with Chinese trade but emphasized that unilateral tariffs against the nation were not ideal for American businesses and consumers when it comes to addressing the issue. The trade associations fear that the White House’s decision to impose tariffs on China, in particular, will raise costs for American consumers, kill thousands of jobs, and have an overall negative impact on the United States economy.

On U.S. Trade with China and Europe

David Olive, a business columnist for the Toronto Star, lays out the flaws in President Trump’s tariff plans.

David Hoffman and Erik Lundh of Bloomberg argue that a closer analysis of China’s trade “deficits” are required to have a more effective trade policy between the U.S. and China.

Handelsblatt foreign affairs correspondent Jens Münchrath argues the case for compromise with the White House rather than pursuit retaliatory measures.

What We Are Reading (or listening to) in IR

The New York Times editorial board highlights the efforts being made by U.S. policymakers to end U.S. involvement in Yemen.

Tamara Taraciuk Broner for Univision News discusses the important role Venezuela’s journalists continue to play in drawing international attention to the crisis despite the great personal risk.

Michael Morell, former deputy director of the CIA, discusses in a podcast through the East West Institute how South Asia’s global role is evolving.

The Journal encourages a variety of views. Any positions, opinions, or arguments expressed in our articles represent the views of the authors and do not necessarily reflect the views of the Journal or the School of Diplomacy.

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